Ottawa is bracing for a fight this spring with brewers large and small as the federal government prepares to implement new taxes on beer.
Starting in April, the tax on local and imported beer sold within Canada will increase by 2%. Going forward, there will be an additional tax increase every year tied to the rate of inflation. This tax hike has the brewing community angry and fighting back.
Beer Canada, the trade association advocating on behalf of brewers, has launched a national campaign to get the government to scrap its tax increase. “Axe the Beer Tax,” as the campaign is called, asks the public to sign a petition and write to their local Member of Parliament voicing concerns and anger.
“Obviously this is troubling because it’s going to automatically increase prices for our customers, who are already paying a 47% tax rate, on average, across the country,” said Luke Harford, President of Beer Canada, in an interview with the Canadian Press. “Our point is that, if they want to increase tax they should talk about it every year as opposed to hiding it in the legislation where it automatically goes up every year,” he added.
The industry association believes the tax hike will hurt an industry that has already seen a decline in recent years. A report published Monday by the Conference Board of Canada showed that per capita consumption of beer declined by 10% over the past decade. The high price is among the contributing factors to the decrease, according to the report.
The report also showed that beer remains a popular beverage among Canadians, comprising as much as 40% of all alcohol sales. Beer currently generates $5.7 billion in annual tax revenue, the report states.
According to a Ministry of Finance spokesperson, “The annual inflationary adjustment will provide alcohol producers with greater certainty in the future and is in line with actions taken by many provinces.” The ministry added that the 2% increase amounts to a nickel on the cost of a case of beer and that “the last effective increase .was over 30 years ago.”
Beer Canada officially launched its campaign against the federal government on Monday of this week, asking beer lovers across Canada to sign a petition requesting that Finance Minister Bill Morneau axe the escalating beer tax. The petition had collected 15,400 signatures as of Tuesday morning, according to the association.
In last year’s federal budget, the Liberal government increased the excise duty rates on alcohol products, including beer, by 2%. At that time, the government also announced it would annually adjust the tax by indexing it to inflation, with the first inflationary adjustment coming this April.
But Beer Canada wonders how the 50 brewers it represents will manage these yearly tax bumps. Already, federal, provincial and municipal taxes on beer products are high, according to Beer Canada, which estimates that 47% of the current price of beer in Canada is taxes. The sector’s also been hit by other pressures recently, such as high material and energy costs, and increasing labour costs.